June 2011

The Finance SPDR (XLF) has been on a road to nowhere for almost two years now. After first moving above 15 in September 2009, the ETF embarked on a long trading range with support near 13 and resistance near 17. XLF has crossed the mid point (15) at least 10 times since September 2009. Even though the ETF closed below 15 at the beginning of June, a pair of indecisive candlesticks formed the next two weeks and the ETF bounced off support in late June. Support stems from broken resistance (yellow highlight).
This could be a big moment for the beleaguered sector. XLF has been
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Traders are expecting the horrible market we've seen thus far in June to only get worse. The VIX is the ticker symbol for the Chicago Board Options Exchange Market Volatility Index. It measures implied volatility of S&P 500 index options, or the "expectations" of market action over the next 30 days. The formula takes into account current market prices for all out-of-the-money calls and puts for options expiring in one to two months. The goal is to determine how much premium traders require on option plays. If traders believe higher volatility is in order
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There are several new indexes at StockCharts.com that everyone should check out. They are our new "Theory" indexes that contain artificial, idealized versions of four important chart patterns - a sawtooth reversal pattern ($THSAW), a sine wave pattern ($THSINE), a "perfect" Elliott Wave pattern ($THEW), and a good approximation of an "ideal" Head and Shoulders reversal pattern ($THHS).
Here's a comparison of an annotated version of $THEW along with a snapshot of an "ideal" Elliott Wave taken from our friends at ElliottWave International:
As you can see, $THEW
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Last Thursday's message showed the point & figure version of the % NYSE stocks above their 200-day moving average in a downside correction. I suggested that the first sign of improvement would be a three-box reversal to a rising X column. We got that this week, but it proved short-lived. That's the bad news. The good news is the p&f chart now gives us a clearcut chart point to use to spot any market upturn. A traditional p&f buy signal requires a rising X column to exceed a previous X column. This week's high point was at 60. That means that the $NYA200R needs to hit 61 to
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While the U.S. Dollar Index didn't do so well Friday, it is getting ready to generate a Trend Model buy signal. Note on the chart below that the 20-EMA is less than a hair away from crossing up through the 50-EMA, which will mechanically generate the buy signal. Note also that the Index broke above the top of a descending wedge formation. Friday's decline, so far, was the expected snapback to the line, which is now support. Unless there is more followthrough to the downside, I'd have to say this chart is bullish.
Now let's look at the chart of the Dollar Index Bullish ETF
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The Energy SPDR (XLE) has been one of the weakest sectors this month. In fact, the chart shows XLE breaking support from a large Head-and-Shoulders reversal pattern. The left shoulder peaked in March, the head peaked in April and the left shoulder peaked at the end of May. With a 7% decline the last 13 days, the ETF broke below the lows extending back to February. This confirms the pattern and targets a move to around 65. The height of the pattern (81 – 73 = 8) is subtracted from the support break (73 – 8 = 65) for a target. At this point, traders need to be careful that the right
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IMPROVEMENTS TO PREDEFINED SCAN RESULTS - We've been hard at work improving our predefined scan results page so that you can quickly see which scans have had the biggest improvements over the course of the past day. We now have red and green bars that show you the difference in the scan results from the previous trading day. We've also grouped our scan results into (generally) bullish and bearish scans. That means that if you see a bunch of red bars by the "bullish" scans and a bunch of long green bars by the "bearish" scans, the market has probably moved lower (and vice
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Hello Fellow ChartWatchers!
Recently we introduced a new cycle analysis tool in our ChartNotes annotation tool - the Cycle "Sine Wave" tool. This tool helps you look at various period cycles on your charts. It can be used on any chart in a wide variety of ways but many people people will probably use it to look for cycles on long term charts.
To use the tool, create a SharpChart and then start our ChartNotes annotation tool by clicking on either of the "Annotate" links below the chart. Once ChartNotes is running, you can click once on the old "Cycle Lines" button in
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Thurday's message showed the S&P 500 threatening two important support lines. Unfortunately, both have been broken. Chart 1 shows the SPX closing below its 100-day average (green line) for the first time since last August. The weekly bars in Chart 2 show the SPX ending well below an up trendline drawn under its August/March lows. Those downside violations leave little doubt that the market has entered a downside correction. The most logical downside target at this point is a drop to the March low near 1250 which also happens to coincide with the 200-day (40-week) moving averages which
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There are many sentiment indicators that can be followed but the two I most closely follow are the Volatility Index (VIX) and the Equity Only Put Call Ratio (EOPCR). There are sentiment gauges that tell you how investment letter newswriters "feel" about the market. Personally, I'd rather just see where the money is going. I don't need anyone to tell me how they feel. I have unique ways of following both the VIX and the EOPCR, so I thought now might be a good time to discuss one application of each. My last two articles discussed significant warning signs in
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In the past 10-months, the commodity markets have rallied rather substantially on the back of the QE-2 campaign. But, we would be remiss if we didn't point out that Natural Gas did not participate, with prices below the August levels extant when Fed Chairman Bernanke announced that QE-2 was a probable event. However, recent price gains in "natty" have given us reason to believe that it shall play "catch-up" in the weeks and months ahead, with money coming out of higher priced commodities and going into this laggard.
Technically speaking, the inverse "head & shoulders" bottom was
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For over three months the market has been chopping around and making very little progress. In the process internals have been weakening, a fact that is reflected in the signal table below. In our Decision Point Alert Daily Report we track mechanical timing signals on 27 market and sector indexes. In addition to the broad market indexes, we track the nine SPDR sectors and their equal weighted counterparts, which normally perform differently than the cap-weighted indexes.
Of those 18 sector indexes 10 have switched from buy signals to neutral over the last few months. Four had
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With economic indicators and employment statistics coming up short this week, retail stocks came under considerable selling pressure. Led by weakness in Wal-Mart and Home Depot, the **Retail HOLDRS (RTH)** is down some 7% the last few weeks. Chart 7 shows RTH breaking the trendline extending up from early September. RTH is clearly in a short-term downtrend with the next big support zone in the 102-104 area. As far as the long-term trend is concerned, note that a major topping pattern has yet to take shape. We have yet to see a Double Top, Head-and-Shoulders or some other distribution
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